Businesses turn to the black market for their regular dollar influx as the exchange rate yo-yos between MVR18.10 and MVR18.30 per United States dollar (USD). The primary cause of this fluctuation, according to forex traders, is the scarcity of physical dollar bills within the market.
Novice traders are experiencing rates surpassing MVR18 in the past few days, whereas seasoned players dealing with substantial dollar sums are enjoying slightly better rates between MVR17.90 and MVR17.95. Forex traders are quick to attribute this cash shortage and economic quagmire to the increasing prevalence of tourists opting for card payments in their transactions.
The Maldivian economy, heavily reliant on the tourism industry, is intricately interconnected with it at every level. Therefore, seemingly minor shifts such as the tourist preference for card payments send shockwaves through various facets of the economy and people’s livelihoods.
Market insiders emphasise that both local businesses and foreign entities are grappling to secure dollar amounts below the MVR18 mark. If the dollar’s value remains stable throughout the week, there’s a significant likelihood that the exchange rate will cement at MVR18.
Traditionally, the months of June and July, along with the extended holiday season, witness a substantial outflow of Maldivians embarking on annual travels or making the Hajj pilgrimage to Saudi Arabia. This year, during this period, the dollar rate surged to its current standing before promptly retreating to a more moderate MVR17.5 within two weeks.
The market’s darkest days were endured during the 2020 pandemic outbreak when dollar rates peaked at a staggering MVR 20. However, the subsequent year, 2021, brought respite for businesses, with rates stabilising at MVR17.3 to MVR17.45.
Surprisingly, despite the fluctuating dollar rate, tourist arrivals have steadfastly increased, with an estimated 5,600 arrivals daily. This marks a 17 percent surge in comparison to the Ministry of Tourism’s 2022 statistics.
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